Cenovus Energy Inc (TSX:CVE), the Canadian oil producer, said Monday it would buy Athabasca Oil (TSX:ATH) in a C$5.7 billion (approx. $4 billion) cash-and-stock deal, expanding its Alberta oil sands operations.
The acquisition follows Cenovus’s purchase of MEG Energy last year and adds thermal oil assets as the company seeks to improve efficiency, lower costs and strengthen cash flows.
Thermal oil projects use steam injection to heat underground reservoirs, allowing heavy crude to flow toward production wells and be brought to the surface.
The deal will add about 45,000 barrels of oil equivalent a day to Cenovus’s production and give it more long-life oil sands assets near existing operations.
Athabasca shareholders will receive 0.264 Cenovus shares for each share held, valuing the transaction at about C$5.76 billion, or roughly $4 billion, based on Athabasca’s 480.34 million shares outstanding.
The implied offer price of C$12 a share represents a premium of about 13.4% to Athabasca’s Friday closing price.
Cash will account for 65% to 75% of the consideration, with Cenovus shares making up the remainder, while cash payments will be capped at C$4.3 billion.
Cenovus said Athabasca’s Leismer and Corner assets have more than 75 years of proved and probable reserve life and could help increase thermal oil production to 115,000 barrels a day by 2032.
The deal will also give Cenovus full ownership of Duvernay Energy, strengthening its position in the Kaybob Duvernay area, where it sees potential to increase production to 20,000 barrels of oil equivalent a day.
The companies’ boards have approved the transaction, which is expected to close in December.
Toronto-listed shares of Athabasca surged nearly 15% on Monday morning, while shares of Cenovus were down around 4% in both New York and Toronto.
Source: www.proactiveinvestors.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
